GM agrees to increase loan to Delphi by $350M

NEW YORK (AP) -- General Motors Corp. has agreed to lend Delphi Corp. an additional $300 million as the auto parts supplier struggles to get out of bankruptcy protection, according to a court filing.

Delphi said in a filing Wednesday in U.S. Bankruptcy Court in New York that pending court approval, GM would increase its loan to the parts supplier to $950 million from $600 million so Delphi can maintain a minimum level of liquidity.

A hearing before U.S. Bankruptcy Judge Robert Drain was scheduled for Aug. 26.

Delphi has been operating under Chapter 11 bankruptcy protection since October 2005.

The original $650 million GM loaned to its former auto parts arm was supposed to have been repaid when Delphi emerged from bankruptcy protection, but that has been delayed by tight credit markets and the pullout of a major investor.

Last week, Drain ruled that Delphi could pursue a lawsuit designed to force hedge fund Appaloosa Management LP and several others to participate in a $2.55 billion equity deal from which they had withdrawn in April.

Delphi said that withdrawal violated a court-approved agreement, and it has accused Appaloosa of interfering with its efforts to get $6.1 billion in loans that it needed to meet the terms of the investment agreement. Appaloosa had argued it should not pay more than $250 million, a cap it claims was set in the original contract.

Appaloosa's withdrawal has hobbled the parts supplier's effort to exit from bankruptcy protection. A collapse of the Appaloosa deal would force Delphi to redraw its restructuring plan, further delaying a case that has been postponed several times already because of the drying up of the credit markets.